EXHIBIT
10.26


 





 


SERVICES
CONTRACT


 


THIS AGREEMENT is made effective on March 1st, 2007, for a period
of one year, by and between Heron Lake BioEnergy, LLC (hereinafter “HLBE”), and
Gerber & Haugen, P.L.L.P. 
(hereinafter “Contractor”).


 


NOW, THEREFORE, FOR AND IN CONSIDERATION of the mutual promises and
agreements contained herein, HLBE hires Contractor, and Contractor agrees to
work for HLBE under the terms and conditions hereby agreed upon by the parties:


 


SECTION 1 – WORK TO BE PERFORMED


 


1.1                               Scope of Work.  Contractor
shall provide HLBE with the services of a Chief Financial Officer and related
Certified Public Accountant and consulting services for HLBE as outlined in
Gerber & Haugen, P.L.L.P.’s letter proposal to Mr. Robert J.
Ferguson dated January 26, 2007, a copy of which is attached hereto as Exhibit A
and incorporated herein by reference.  As
of the effective date of this Agreement, and subject to the terms and
conditions of this Agreement, James A. Gerber shall be and hereby is, and shall
serve as, the Chief Financial Officer of HLBE, and shall perform such duties as
are customary for the Chief Financial Officer of a public company similar to
HLBE, and such other duties as may be assigned by the Board of Governors of
Employee.  Collectively, the foregoing
scope of work and services referred to herein as the “Services.”


 


1.2                               Responsibility of
Contractor.  Contractor shall perform the Services as an
independent contractor in accordance with its own methods, subject to the terms
of this Agreement and applicable laws and regulations, including Federal and
State Securities laws applicable to the Chief Financial Officer position of
HLBE being assumed by Contractor. 
Contractor acknowledges that HLBE will be registering under Section 12(g) of
the 1934 Exchange Act within ninety (90) days and will be a public reporting
company under such 34’ Act upon the effectiveness of such registration.  Contractor’s liability arising out of or in
connection with the Services shall be limited to claims, causes of actions, or
damages caused by or relating to (1) Contractor’s failure to perform said
Services in accordance with normal professional standards for performing
services of a similar nature, and (2) replied in writing to Contractor
within a reasonable time of when HLBE becomes aware of the failure.  Where HLBE’s project requires public agency
approval or review related to the Services, Contractor will assist HLBE in
facilitating approval or review in accordance with normal professional
standards for the Services being provided hereunder.  However, Contractor does not assume
responsibility for securing approval by such agency.


 


HLBE shall not be obligated hereunder to indemnify, save and hold
harmless Contractor, its officers, employees or agents against any damage, liability,
loss, cost or claim which arises out of or in connection with the intentional
wrongful acts of, or the active negligence of, Contractor, or its officers,
employees or agents.


 


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1.3                               Duties.  Contractor
agrees to perform the Services for HLBE on the terms and conditions set forth
in this Agreement, and in accordance with Exhibit A.


 


SECTION 2 – COMPENSATION


 


2.1                               Compensation.  HLBE will pay
Contractor for the Services in accordance with Exhibit A.  Invoicing of and payment for the Services
will be made on a monthly basis. 
Invoices shall be due and payable within ten (10) days of receipt.


 


See Exhibit A


 


2.2                               Withholding.  Contractor is
an Independent Contractor and shall be responsible for his own income taxes and
other employment taxes.


 


SECTION 3 – INDEPENDENT CONTRACTOR STATUS


 


Contractor acknowledges that he is an independent contractor and is not
an agent, partner, joint venturer nor employee of HLBE.  Contractor shall have no authority to bind or
otherwise obligate HLBE in any manner nor shall Contractor represent to anyone
that it has a right to do so, provided that James A. Gerber shall have
authority to act as HLBE’s Chief Financial Officer in accordance with this
Agreement and Board authorization granted pursuant thereto.


 


SECTION 4 – BOARD POLICY PROVISION


 


Notwithstanding the Services provided hereunder, the property, funds,
affairs, and business of HLBE shall continue to be managed by and under the
direction of the Board of Governors of HLBE. 
With respect to all matters of administrative, corporate governance and
fiscal policy of HLBE, as distinguished from the day-to-day activities
associated with the Services provided hereunder, Contractor shall be guided by
and adhere to any and all policies and directives established by the Board of
Governors of HLBE in performing the Services outlined herein.


 


SECTION 5 – ASSIGNMENT AND SUBCONTRACTING


 


This Agreement shall not be assigned by either party without the prior
written approval of the other.  Except
for Services provided by James A. Gerber as Chief Financial Officer of HLBE,
Contractor may subcontract portions of the services to a qualified
subcontractor with prior approval of HLBE. 
Contractor agrees that HLBE will incur no duplication of costs as a
result of any such subcontract.


 


SECTION 6 – REPRESENTATIONS OF WARRANTIES OF
CONTRACTOR


 


Contractor, and James A. Gerber as Chief Financial Officer, shall
discharge the duties and perform the Services hereunder in good faith, in a
manner Contractor and Gerber reasonably believes to be in the best interests of
HLBE, and in accordance with normal and customary professional standards for
such Services and CFO position with the care 


 


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an ordinarily prudent person in a like position would exercise under
similar circumstances.


 


SECTION 7 – INSURANCE


 


Contractor will maintain at its own cost and expense professional
errors and omissions insurance and such public liability and other insurance as
may protect and indemnify HLBE and its governors, officers, agents, and
employees from claims, causes of action, damages, or liabilities, which may
arise from 01’ relate to the terms and conditions of this Agreement and the
performance of the Services hereunder, up to the limits specified below.


 


1.                                       Comprehensive General Liability on an
occurrence basis:


a)                                      General aggregate - $1,000,000.00


b)                                     Products completed, operations aggregate
-0-


c)                                      Personal and advertising injury -
$1,000,000.00


d)                                     Each occurrence - $1,000,000.00


e)                                      Fire damage - $52,200.00


f)                                        Medical expense (anyone person) - $5,000
per person / $10,000 per occurrence.


 


The foregoing aggregate limits shall apply on a per project basis.


 


2.                                       Automobile Liability:


a)                                      Any auto coverage - $500,000.00


b)                                     Hired autos - $1,000,000.00


c)                                      Non-owned auto coverage - $1,000,000.00


 


3.                                       Workers’ Compensation Insurance and
Employer Liability


a)                                      Each accident - $100,000.00


b)                                     Disease - policy limit - $500,000.00


c)                                      Disease - each employee - $100,000.00


 


4.                                       Disability Benefits - Liability
(Statutory requirements)


 


5.                                       Professional Errors and Omissions
Insurance coverage of not less than $1,000,000.00 per claim and $1,000,000.00
annual aggregate or design liability coverage of not less than $1,000,000.00


 


Contractor’s insurance may not cover the actions of its subcontractors
and those subcontractors not covered should be required to meet stipulated
insurance requirements of HLBE.


 


SECTION 8 – COMPLETION AND ACCEPTANCE


 


Upon completion of the term of this Agreement, HLBE shall promptly
provide Contractor with a written listing of any Services not completed.  Any Services not listed 


 


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by HLBE as incomplete in a listing delivered to Contractor within
thirty (30) days of the end of the term or this Agreement shall be deemed
complete.  With respect to Services
listed by HLBE as incomplete, Contractor and HLBE shall agree on a schedule and
payment to complete such Services and the above completed procedure shall be
repeated.


 


SECTION 9 – CONFIDENTIAL INFORMATION


 


The parties agree that the information being reviewed and available to
Contractor to perform the Services is the confidential and proprietary
information of HLBE.


 


HLBE and Contractor agree to the terms and conditions set forth in Exhibit B,
attached hereto, with respect to said Confidential Information, which terms and
conditions are incorporated herein by reference.


 


SECTION 10 – AMENDMENTS


 


Any amendment to this Agreement shall be in writing and signed by
Contractor and HLBE.  In the event that
any of the provisions of this Agreement are held to be unenforceable or invalid
by any court of competent jurisdiction, the parties shall negotiate an
equitable adjustment to the provisions with a view toward affecting the purpose
of this Agreement.  In the event that any
of the provisions of this Agreement are held to be unenforceable or invalid by
any court of competent jurisdiction, the parties shall negotiate an Agreement.  In such a case, the validity and
enforceability of the remaining provisions, or portions or applications
thereof, shall not be affected thereby.


 


SECTION 11 – TESTIMONY


 


Should Contractor, its directors, officers or employees be required to
testify or to submit information to any judicial or administrative hearing
concerning matters, this will be performed in accordance with the Cost Schedule
then in effect.  Should Contractor be
required by a third party to testify at such a hearing, Contractor shall notify
HLBE as to the date and time of such hearing. 
HLBE agrees to save and hold harmless Contractor from and against all
costs incurred as a result of a judicial or administrative hearing concerning
the services provided for herein.


 


SECTION 12 – ENTIRE AGREEMENT


 


In the event any services provided for herein are authorized by HLBE to
be performed or caused to be performed by Contractor prior to the effective
date of this Agreement, such Services shall be deemed to have been performed
under this Agreement.  This Agreement,
including all attachments incorporated herein by reference, constitutes the
entire Agreement between the parties. 
Any oral agreements, understandings, proposals, purchase orders or
negotiations are intended to be integrated herein and to be superseded by the
terms and conditions of this Agreement.


 


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SECTION 13 – TERM AND TERMINATION


 


The term of this Agreement is one (1) year, commencing of the
effective date of this Agreement and ending on March 1st, 2008.  HLBE may terminate, with or without cause,
upon thirty (30) days written notice to Contractor.  Absent Contractor’s breach of this Agreement,
Contractor shall be paid for Services rendered to the date of termination.  Contractor may suspend or terminate this
Agreement upon thirty (30) days written notice to HLBE in the event of
substantial failure by HLBE to perform in accordance with the terms of this
Agreement including, but not limited to, nonpayment of amounts owing to
Contractor through no fault of Contractor or an unreasonable delay caused by
HLBE or its agents.


 


SECTION 14 – MISCELLANEOUS PROVISIONS


 


14.1                        The provisions of this Agreement shall be
binding upon and inured to the benefit of the heirs, personal representatives,
successors and assigns of the parties.


 


14.2                        In the event of a default under this
Agreement, the defaulted party shall reimburse the non-defaulting party or
parties for all costs and expenses reasonably incurred by the non-defaulting
party or parties in connection with the default, including without limitation,
attorney’s fees.  Additionally, in the
event a suit or action is filed to enforce this Agreement or with respect to
this Agreement, the prevailing party or parties shall be reimbursed by the
other party for all costs and expenses incurred in connection with the suit or
action, including without limitation, reasonable attorney’s fees at the trial
level and on appeal.


 


14.3                        No waiver of any provision of this
Agreement shall be deemed, or shall constitute, a waiver of any other
provision, whether or not similar, nor shall any waiver constitute a continuing
waiver.  No waiver shall be binding
unless executed in writing by the party making the waiver.


 


14.4                        This Agreement shall be governed by and
shall be construed in accordance with the laws of the State of Minnesota.


 


14.5                        This Agreement constitutes the entire
agreement between the parties pertaining to its subject matter and it
supersedes all prior contemporaneous agreements, representations and
understandings of the parties.  No
supplement, modification or amendment of this Agreement shall be binding unless
executed in writing by all parties.


 


14.6                        Renewal of contract by oral or written
notice thirty (30) days prior to maturity date of existing contract.


 


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AUTHORIZATION TO PROCEED:


 


	
  HERON LAKE BIOENERGY, LL

  	
   

  	
  JIM GERBER

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
    Robert J. Ferguson

  	
   

  	
  By:

  	
    Gerber & Haugen PLLP

  
	
   

  	
   

  	
   

  	
   

  	
    /s/ James A. Gerber

  
	
   

  	
    Signature /s/ Robert J. Ferguson

  	
   

  	
   

  	
    Signature

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  CEO

  	
   

  	
  Title:

  	
  Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  3/01/07

  	
   

  	
  Date:

  	
  3.01.07

  
							



 


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EXHIBIT A


 


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GERBER & HAUGEN, P.L.L.P.


 


Certified Public
Accountants


 


	
  James A. Gerber, CPA

  	
   

  	
  2330 26th Street

  	
   

  	
  Steven G. Haugen, CPA

  
	
   

  	
   

  	
  Slayton, Minnesota  56172

  	
   

  	
   

  
	
   

  	
   

  	
  (507) 836-8564, Fax (507) 836-8566

  	
   

  	
   

  



 


January 26,2007


 


Heron Lake BioEnergy


Heron Lake, Minnesota


 


Attention:  Board of Directors


 


In re:  Chief Financial Officer Duties


 


To The Board:


 


This proposal is to
provide Heron Lake BioEnergy with the services of a Chief Financial
Officer.  It is Gerber & Haugen’s
desire to provide these services under the following management:


 


1.                                       Gerber & Haugen would provide
the services within HLBE’s facilities as an independent contractor;


 


2.                                       A Gerber & Haugen staff person
with a four year college accounting degree would be provided full time starting
approximately on April 1, 2007. 
Full time at Gerber & Haugen for salaried personnel is
considered to be 2,200 hours in a calendar year.


 


	
  Cost for these
  services would be:

  	
   

  	
   

  	
   

  
	
  Salary of
  Employee

  	
   

  	
  $

  	
  40,000.00

  	
   

  
	
  Gerber &
  Haugen employer share of health insurance cost

  	
   

  	
  $

  	
  3,600.00

  	
   

  
	
  Gerber &
  Haugen three percent matching of retirement

  	
   

  	
  $

  	
  1,200.00

  	
   

  
	
  Employer share
  of Fica and Medicare

  	
   

  	
  $

  	
  3,060.00

  	
   

  
	
  Other taxes,
  workers compensation and overhead

  	
   

  	
  $

  	
  2,140.00

  	
   

  
	
   

  	
   

  	
  $

  	
  50,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Cost converted
  to hourly rate

  	
   

  	
  $

  	
  22.73

  	
   

  
	
  Hourly rate if
  requirements exceed 2,200 hours

  	
   

  	
  $

  	
  34.10

  	
   

  



 


The purpose of this
position is to provide a person who is interested in being a chief financial officer
in the future.  It is also my conviction
that I can prepare this person for the long term for your company.


 


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3.                                       Jim Gerber, Partner in Gerber &
Haugen, would be responsible for:


A.                                   Supervising the Gerber & Haugen
staff person and any HLBE accounting employees (two people estimated);


B.                                     Making sure all duties as specified in
HLBE’s chief financial officer job description are completed;


C.                                     Reporting directly to the General Manager
and Board of Directors.


 


Cost for these services
would be:


                Fifty dollars per hour with the following
constraints:


                                Minimum for year - $50,000;


                                Maximum per year $85,000


 


For the Firm,


 


	
  /s/ James A. Gerber

  	
   

  
	
  James A. Gerber

  	
   

  



 


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EXHIBIT B


 


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MUTUAL
CONFIDENTIALITY AGREEMENT


 


THIS
AGREEMENT made this 1st day of March, 2007 by and between Heron Lake BioEnergy
and Gerber & Haugen PLLP may hereinafter jointly be referred to as the
“parties”.


 


Now,
therefore, in consideration of the mutual covenants and agreements set forth
herein, the parties agree as follows:


 


1.                                       Definition
of Confidential Information:  For purposes of this Agreement, the parties
agree that the term “Confidential Information” shall be defined as all
information provided orally, in writing, electronically or as observed on
visits to facilities and which relate to new or existing products, machinery,
systems, processes and / or business operations, including, without limitation,
data, know-how, expertise, formulae, designs, sketches, photographs, plans,
drawings, samples, reports, customer lists, pricing information,
specifications, research and development studies, findings, reports, memoranda,
manufacturing processes and engineering, new product concepts and capabilities,
inventions, marketing and business plans/strategies, and the like provided to
one party by the other party.


 


2.                                       Exclusions:  For purposes of this Agreement, information
shall not be deemed to be Confidential Information is such information:


 


(a)                                  was
proven by the recipient to be known by the recipient prior to the disclosure by
the other party as evidenced by written documents, or


 


(b)                                 was
available to the general public at the time of the disclosure to recipient by
virtue of a printed publication; or


 


(c)                                  at
a later date becomes available to the general public by virtue of a printed
publication through no fault of the recipient; or


 


(d)                                 was
rightfully acquired by the recipient from a third party who is not in breach of
a confidential relationship with any party to this Agreement with regards to
such information; or


 


(e)                                  was
independently developed by the obligated party prior or subsequent to
disclosure by the other party as evidence by written documents.


 


3.                                       Obligations
of Confidentiality:  The parties agree to limit internal
dissemination of Confidential Information within its own organization to
individuals whose duties justify the need to know such information, and then
only provided that there is a clear understanding by such individuals of their
obligation to maintain the confidentiality and trade secret status of such
information and to restrict its use solely for the purpose specified 


 


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herein.  Each
party shall be responsible for the actions of its employees, agents, officers
and subcontractors.


 


Should
the party stated above want to discuss any confidential information with his or
her customers, the party stated above agrees to have Heron Lake BioEnergy
obtain a signed Confidentiality Agreement from each customer before
confidential information is disclosed.


 


4.                                       Use
of Confidential Information:  The party stated above agrees not to use the
Confidential Information for the purposes of manufacture or development of a
similar process for its own use or to assist another individual or company to
design, manufacture or develop the process in the use or for any other company’s
use.  The party stated above also agrees
not to use the Confidential Information to develop or to take business, which
is similar to that of the services, and products similar to that offered by
Heron Lake BioEnergy.


 


5.                                       Survival:  The restrictions and obligations of this
Agreement shall Survive any Expiration, termination or discontinuance of the
use of Heron Lake BioEnergy by the party stated above, and or its clients and
shall continue to bind the parties, their successors and assigns.


 


6.                                       Disclaimer
of Other Relationships:  This Agreement does not create a relationship
of agency, partnership, joint venture or license between the parties.


 


7.                                       Equitable
Remedies:  It is recognized and agreed to by the parties
hereto that irreparable damage would result from any breach of this
Agreement.  Each party agrees that a
party injured by a breach or a threatened breach of this Agreement shall have
the remedy of a restraining order, injunction or other appropriate equitable
relief to enforce this Agreement in addition to all other remedies under the
law.


 


8.                                       Restriction
of Rights:  Nothing contained in this Agreement shall be
construed as granting to the Party stated above hereunder any rights, by
license or otherwise, to use any Confidential Information disclosed pursuant to
this Agreement without written approval of Heron Lake BioEnergy.


 


9.                                       Waiver:  The waiver by either party of a breach of any
provision of this Agreement shall not constitute or be construed as a waiver of
any future breach of any provision(s) in the Agreement.


 


10.                                 Governing
Law:  This Agreement shall be governed by a construed
in the Accordance with the laws of the State of Minnesota, USA and jurisdiction
and venue with respect to any suit in connection with this Agreement shall
reside in the courts of State of Minnesota USA.


 


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11.                                 Complete
Agreement: Written Modification Only:  This Agreement, together with any
attachments, constitute the entire agreement between Heron Lake BioEnergy and
the Party stated above concerning this subject matter, and supersedes all
previous prior communications, statements, representations and understandings,
whether oral or written.  Modifications
or amendments of any kind in conjunction with this Agreement must be in
writing, and signed by both parties.


 


IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.


 


	
   

  	
   

  	
  Printed
  Name:

  	
     Gerber &
  Haugen PLLP

  
	
   

  	
   

  	
   

  	
           James
  A. Gerber

  
	
  /s/
  Robert J. Ferguson

  	
   

  	
  Signature:

  	
    /s/
  James A. Gerber

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated:
  3/1/07

  	
   

  	
  Dated:

  	
    3.01.07

  
	
   

  	
   

  	
   

  
	
  President
  – Board of Governors

  	
   

  	
  Title:

  	
  Partner

  
	
   

  	
   

  	
   

  
	
  Heron
  Lake BioEnergy, LLC

  	
   

  	
  Mailing
  Address:

  	
    2330
  26th St

  
	
   

  	
   

  	
   

  	
    Slayton,
  MN 561272

  
	
  91246
  390th Avenue P.O. Box 198

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Heron
  Lake, MN 56137

  	
   

  	
   

  
								



 


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